China Stocks Cheaper Than U.S. Shares for First Time Since 2006
June 13, 2008 (Bloomberg) -- Chinese stocks became cheaper than U.S. shares for
the first time in more than two years relative to earnings after the country's
central bank told lenders to set aside a record amount of money in reserve to
curb inflation.
The 44 percent slump this year in China's CSI 300 Index, the steepest decline
among the world's 20 biggest equity markets, closed the price-earnings gap with
the Standard & Poor's 500 Index from a 127 percent premium at the start of
2008, data compiled by Bloomberg show.
The gauge of Chinese companies traded in Shanghai and Shenzhen is valued at
21.82 times earnings, compared with 21.84 for the S&P 500. The last time the
CSI 300 traded at a discount to the benchmark for American equities was in
March 2006.
Investors should buy Chinese stocks after the shares' recent declines and
because companies in the nation will have ``much better'' pricing power on
slower inflation, JPMorgan Chase & Co. said.
JPMorgan named Anhui Conch Cement Co., Sinotruk (Hong Kong) Ltd., and
Industrial and Commercial Bank of China Ltd. as its top China picks, according
to a report released today. China Shenhua Energy Co., the nation's No. 1 coal
producer, and China Petroleum & Chemical Corp., its largest refiner, were also
among the brokerage's favored stocks.
``Investors may want to start buying China again,'' analysts at JPMorgan
including Frank Gong wrote. Gong's team was ranked the best China researchers
by Institutional Investor magazine's fund manager survey this year.
